Freedom Bank to start M&A business focused on government contracting

Freedom Bank of Virginia is creating a new mergers and acquisitions advisory businesses in hopes of tapping into the growing number of government contracting deals in the area.

“Everyone talks about sequestration like it’s magic, but the truth is that the government has been cutting back in Washington for over a year,” said Craig Underhill, the bank’s president and chief executive.

The Fairfax-based bank has applied for a broker-dealer license from the Financial Industry Regulatory Authority, and expects to have the new business up and running by the beginning of the third quarter, Underhill said. The new division, FBV Advisors, will be led by Rob Rubin, formerly an investment banker for JPB Partners in Columbia.

Analysts say the timing makes sense for the bank, which has long specialized in government contracting loans.

“There’s been a glut of [merger and acquisition] deals in the last few years,” said Allan Bach, founder of Dogwood Research, an advisory firm based in Richmond. “A lot of companies are saying, ‘Okay, we’ve made it through the downturn, what’s the next step?’ ”

The bank, with offices in Fairfax and Vienna, has $238.6 million in assets. Deposits were up 16 percent during 2012, which the company attributed to its “strong penetration of the government contracting market.”

The new business will deal primarily with companies that have revenue of $10 million to $40 million, Underhill said.

“Several of our clients have decided that the business model just isn’t working for them and they’re cashing in,” he added. “So we thought we may as well try to make some money off of what they’re doing.”

Bach said the bank has been growing rapidly since Underhill took the helm in the summer of 2011. Loan production has been up, and the bank nearly doubled its lending staff late last year.

“This is a big deal for Freedom,” Bach said of the new mergers business. “It could have a meaningful impact on their bottom line.”